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Universities are leaving themselves open to the accusation that they are "subsidising commercial work from the public purse" by not recovering costs from externally sponsored research, Graeme Davies, chief executive of the higher education funding council warned vice chancellors at the council's annual conference this week, writes Claire Sanders.

"Contrary to Government policy only 12 HEFCE institutions can demonstrate recovery of costs from externally sponsored contract research at greater than 30 per cent," he said. A report will be issued to institutions in the near future, providing detailed information on this topic.

Recovery rates among institutions from the former polytechnic sector were particularly low. In 1992/93 these institutions recovered just 1.3 per cent of their costs. In 1993/94 they recovered none.

The traditional universities recovered nearly 20 per cent of their costs in 1992/93 and nearly 21 per cent in 1993/94. This meant that overall rates were improving but were still very low. When various sources of research funding are considered separately it becomes clear that universities are particularly bad at recovering costs from charities. They recovered 1.1 per cent of costs in 1992/93 and 2.0 per cent in 1993/94. The highest rates of recovery were from UK public corporations, with nearly 42 per cent of costs recovered in 1993/94.

Professor Davies said: "Institutions should seek to achieve recovery rates that would provide for full economic costs, while recognising that on occasions there may be reasons why the full economic recovery rate may not be charged."

Examples might be when the institution wanted to retain intellectual property rights, when the institution was a contributor to the research, or when the institution benefited from the research.